Techno Fire Protection Services ... vs Mtz Polyesters Ltd.
2002 Latest Caselaw 171 Bom

ORDER

Pratibha Upasani, J.

1. These two Notices of Motion, one taken out by the Plaintiffs Techno Fire Protection Services (P.) Ltd., namely, Notice of Motion No. 1056 of 2001 and the other taken out by Defendants MTZ Polyesters Ltd. being Notice of Motion No. 2218 of 2001, can be disposed of by this common order.

2. The facts which are required to be stated for understanding controversy between the parties are as follows :

There was a concluded contract between the Plaintiffs and the Defendants, whereby, the Plaintiffs sold and delivered to the Defendants, fire protection equipment in accordance with the said contract, worth a total amount of Rs. 75,88,413.63. The goods were received by the Defendants. The Plaintiffs' case is that no grievance was made by the Defendants at that time with respect to the quality or quantity. The Defendants made part payment to the Plaintiffs of a sum of Rs. 60,00,000 between October, 1996 and March, 1997. The remaining amount of Rs. 15,88,413.63 was however not paid by the Defendants to the Plaintiffs. This transaction was of 14-6-1996. Thereafter, there was exchange of correspondence between the parties. One such letter was a letter written by the Plaintiffs dated 12-5-1998, wherein, details of the bills raised and payment received till then was mentioned, and the Plaintiffs called upon the Defendants to certify the balance payment due to the Plaintiffs as per the enclosed statement. The Plaintiffs' case is that the authorised signatory of the Defendants thereafter certified at the foot of the said letter, as follows :--

"To Whomsoever it may concern

We hereby certify that the balance amount payable to M/s. Techno Fire Protection Services Private Limited as on 31st March, (998 as our books

of account is Rs. 15,88,413.63 (Rupees Fifteen Lakhs Eighty Eight Thousand Four Hundred Thirteen and Paise Sixty Three Only).

For MTZ Polyester Ltd.

Sd/

Authorised Signatory".

The rubber stamp of the Defendants was affixed to the said letter.

3. The Plaintiffs' contention is that the Defendants thus unconditionally acknowledged their liability to pay to the Plaintiffs the said sum of Rs. 15,88,413.63 and the Defendants had failed and neglected to pay the said sum or any part thereof. Thereafter, the Plaintiffs issued notice to the Defendants under Section 434 of the Companies Act, 1956 ('the Act'), and when no payment was received even against the said notice, the Plaintiffs filed a Company Petition in this Court being Company Petition No. 1179 of 1999, praying inter alia that the Defendant Company be wound-up on the ground that it was unable to pay its debts.

4. The said Company Petition No. 1179 of 1999 came up for admission before the Company Judge and on 9-2-2000, the learned Company Judge (Coram : S.S. Nijjar, J.) recorded, inter alia as follows :--

"Learned Counsel for the Company states that the Company will deposit in this Court a sum of Rs. 15,88,413.63. This is the amount which has been confirmed by the Company by their letter dated 12th May, 1998..... it is, ... directed that the Company shall deposit the aforesaid amount in this Court within a period of four weeks from today. On the amount being so deposited, the Company Petition stands dismissed and the Petitioner is relegated to its ordinary remedy of a civil suit. If the amount is so deposited, the amount to be transferred by the Prothonotary and Senior Master to the Suit account. The suit to be filed within a period of eight weeks of the deposit being made with the Prothonotary and Senior Master. . . . The Petitioner will be at liberty to make application for withdrawal of the amount in the Civil Suit before the appropriate Court which will be decided in accordance with law."

5. The Defendants accordingly deposited the said sum of Rs. 15,88,413.63 as per the order passed by Mr. S.S. Nijjar, J. and in pursuance to the said order, the said amount was transferred to the suit account and the Company Petition came to be dismissed.

6. Accordingly, the Plaintiffs have now filed the present suit, praying that decree be passed in favour of the Plaintiffs against the Defendants in the sum of Rs. 15,88,413.63 with interest at the rate of 18 per cent per annum from 15-2-1999 till realisation.

7. In the-Notice of Motion No. 1056 of 2001 taken out by the Plaintiffs in this Suit, same relief is claimed. Emphasis is placed on the order passed by Mr. S.S. Nijjar,. J. on 9-2-2000 and it is emphatically argued, relying

upon the endorsement of the Defendants on the Plaintiffs letter dated 12-5-1998 that it was an admission of liability by Defendants towards the Plaintiffs. In the body of the letter, it was stated that since the Plaintiffs statutory auditors required a confirmation of balance from defendants for the purposes of accounts, the same be given. It was on this letter of the Plaintiffs that Defendants certified that the balance amount payable to the Plaintiffs as on 31-3-1998 as per their books of account was Rs. 15,88,413.63.

8. When the Notice of Motion was argued for ad interim relief, after hearing both the sides, Mr. D.K. Deshmukh, J. on 13-6-2001, passed order in terms of prayer clause (a) and allowed the Plaintiffs to withdraw the amount of Rs. 15,88,413.63 which was deposited by the Defendants in the Office of the Prothonotary and Senior Master, High Court, Bombay, pursuant to the order dated 9-2-2000 passed in Company Petition No. 1179 of 1999.

9. It was observed by Mr. D.K. Deshmukh, J. as follows :--

"Now the amount has been deposited by the Defendant. The Defendant has not applied for the withdrawal of the amount and therefore, there are two options open to the court wither to allow the Plaintiff to withdraw the amount or to direct the investment of the amount in fixed deposit in nationalised bank. In my opinion, course of permitting the Plaintiff to withdraw the amount by making provisions for safeguarding the interest, of the Defendant would be the better course. Because, if the amount is withdrawn on furnishing the bank guarantee with an undertaking to redeposit the amount on such terms as may be directed by this Court, the interest of the Defendant would be fully safeguarded. No useful purpose will be served by investing the amount in fixed deposit.

In this view of the matter, therefore, ad interim order in terms of prayer Clause (a) subject to thecondition that before withdrawing the amount the Plaintiff shall furnish a bank guarantee to the satisfaction of the Prothonotary and Sr. master of this Court and shall also file an undertaking in this court undertaking to this Court to redeposit the amount within such time as may be directed by this court and on such terms, including interest, as may be directed by this Court at the final decision of this Notice of Motion."

Thus, Mr. D.K. Deshmukh, J. at the ad interim stage, allowed the Plaintiffs to withdraw the said amount of Rs. 15,88,413.63, which was deposited by the Defendants in the Company Court, and which was specifically transferred to the Suit account on the Plaintiffs furnishing the Bank guarantee.

10. Being aggrieved, the Defendants filed appeal before the Division Bench being Appeal Lodging No. of 2001, on which, the Division Bench consisting of Mr. A.P. Shah and Mr. S.A. Bobde, JJ. admitted the appeal on 2-7-2001 and while requesting the Single Judge to expeditiously hear the

Notice of Motion, it was stated that the order passed by Mr. D.K. Deshmukh, J. dated 13-6-2001 would remain in abeyance. This order about keeping the order of Mr. D.K. Deshmukh, J. in abeyance was passed by consent of both the parties and that is how, the Motion is now before me for finally disposing of the same.

11. In the Notice of Motion No. 2218 of 2001 which is taken out by the Defendants, prayer is made that the Defendants be permitted to withdraw the said amount of Rs. 15,88,413.63 which they have themselves deposited and that, they were willing to furnish any security to the satisfaction of the Court, if they are allowed to withdraw the said amount, till the suit is finally heard and decided.

12. Thus, these two Notices of Motion are for the same reliefs namely for withdrawal of the amount of Rs. 15,88,413.63. The Notice of Motion taken out by the Plaintiffs is in pursuance to the liberty granted by Mr. S.S. Nijjar, J. and Mr. Tulzapurkar, who is appearing for the Plaintiffs forcefully argued that the Notice of Motion taken out by the Defendants be dismissed outright because no liberty was granted to Defendants by Mr. S.S. Nijjar, J. to take out the Notice of Motion for withdrawal of that amount while the Plaintiffs Notice of Motion was in pursuance to the liberty granted to them. He also argued that this amount is an admitted amount and, therefore, he is entitled and is justified in praying for withdrawal of the said amount. According to him, even after the withdrawal of the said amount, which is an admitted liability of the Defendants payable to the Plaintiffs, the interest portion to which the Plaintiffs are entitled, still remains to be paid and the suit can be fought subsequently for that portion only. Simply put, the argument of Mr. Tulzapurkar is that since the amount of Rs. 15,88,413.63 is towards the admitted liability as disclosed from the confirmation/endorsement of the Defendants themselves on the letter of the Plaintiffs dated 12-5-1998 (annexed as Exhibit A) to the affidavit-in-support of the Plaintiffs Notice of Motion), that money is simply theirs and that be handed over to them.

13. Mr. Shashi Nair, who is appearing for the Defendants, on the contrary, pointed out from his affidavit-in-reply, so also, from the affidavit-in-support of his Notice of Motion, so also, from the written statement filed by him that the Defendants deposited this amount not because they admitted this amount to be payable to the Plaintiffs as claimed by them, but in pursuance to the direction of the learned Company Judge. He specifically drew my attention to the correspondence between the parties which is annexed to his clients affidavit, especially the letter dated 29-10-1996 (Exhibit 9 on page No. 63 of Written Statement) whereby, specific grievance is made by the Executive Assistant Chairman Mr. S.D. Palekar to the Plaintiffs Mr. Umesh Rege, who has affirmed the Plaint that

according to their site report, the progress of the work carried on by the Plaintiffs was very slow and that, there was no schedule prepared by the Plaintiffs for the timely completion of job, and that, detailed schedule therefore for the timely completion of the fire hydrant system be sent and the Plaintiffs should depute their Mr. Samuels to the Defendants site immediately. There is also further letter dated 9-11-1996 (Exhibit 10 on page No. 65 of the Written Statement), where, again complaint is made about the Defendants not having received the detailed schedule of the activities (Bar Chart), which the Plaintiffs had promised to send by 7-11-1996 to achieve the target date and which was absolutely essential for monitoring the progress at site. Again there is a letter dated 3-12-1996 (Exhibit 11 on page 67 of the Written Statement) wherein, it is stated that the Defendants regret to inform the Plaintiffs that they were still awaiting the despatch of Fine Water Pump (Kirloskar Make), which was required to be installed at the pump house. Complaint was also made about how important it was to install this pump immediately at site as the flooring work in the pump house was in progress. Then there are other letters which show the Plaintiffs in a poor light, as there are repeated complaints from the Defendants about not carrying out the work properly. There is also a note dated 21-3-1997 (Exhibit 19 on page No. 77 of the Written Statement) which says that the Plaintiffs "Techno Fire just do not have the capability of doing such a massive job with the result that the work was suffering and no progress was there". The details are given below, where various types of complaints are meticulously recorded.

14. Even about the payment, the contention of the Defendants very specifically is that, the Defendants have overpaid the amount to the Plaintiffs and that, in fact are claiming a set-off from the Plaintiffs. It is pertinent to note that the date of the Written Statement is 12-4-2001, which is filed in Court on 21-4-2001, when the Plaintiff had not taken out their Notice of Motion No. 1056 of 2001, as the same was taken out on 27-4-2001. Thus, the contention of the Plaintiffs that the Defendants accepted their services and the delivery of the fire hydrant system without demur, is incorrect. The Plaintiffs have not annexed any correspondence throwing light upon dissatisfaction of the Defendants, but the Defendants have annexed these letters, and it is worth noticing that they have done it before the Plaintiffs took out their Notice of Motion for withdrawal of the said amount deposited by them. On this background, the contention of Mr. Nair for Defendants that the Defendants deposited this amount in the Company Court only because Mr. S.S. Nijjar, J. directed them to deposit that amount so as to show their bona fides, and to avoid admission of the Company Petition, appears to be correct. Even Justice Mr. Nijjar's order dated 9-2-2000, in pursuance to which the said amount came to be deposited by the Defendants, states that".... Without going

into the merits, it is, therefore, directed that the Company (Defendants) shall deposit the aforesaid amount in this Court within a period of four weeks from today". It is also mentioned in the last para of the order that "the Petitioner will be at liberty to make application for withdrawal of the amount in the Civil Suit before the appropriate Court, which will be decided in accordance with law".

15. Mr. Tulzapurkar, during the course of his argument, submitted that since the amount is towards an admitted liability, the same has to be handed over to the Plaintiffs, even without furnishing of any bank guarantee or of other security. To substantiate his argument, he relied upon the Judgment of the Supreme Court reported in T.L. Geotechnics (P.) Ltd. v. D.O. Enterprises (India) Ltd. AIR 2000 SC 3730.

I have perused the said authority (supra) cited by Mr. Tulzapurkar. In this matter, a winding-up Petition under Section 434 of the Act was filed by the appellants T.L. Geotechnics P. Ltd. as the respondent company had defaulted to pay the amount due to the Appellant Company. The respondent company had admitted part of its liability and was seeking permission to deposit the admitted amount. The Company Judge directed the respondent company to deposit the amount within ten weeks. The company Judge permitted the appellant company to withdraw the amount, which was deposited by the respondent company. When the matter was carried in appeal, the Division Bench directed that in case, the deposits made, the same could be withdrawn by the appellants on furnishing security. Aggrieved by this direction of the Division Bench, directing the appellants to furnish security for withdrawing of the amount with regard to which, there was no dispute, the appeal was filed in the Supreme Court, wherein, the Supreme Court observed that the permission to withdraw the amount could not be made conditional by asking the appellant company to furnish security before withdrawal.

In the above mentioned case cited by Mr. Tulzapurkar, it has to be noted that there was no dispute whatsoever between the parties with respect to the amount with respect to which, permission of withdrawal was given. Thus, there was no dispute whatsoever with respect to this amount, and therefore, the Supreme Court held that there could not be any condition of furnishing security before the order of withdrawal came to be passed.

16. In the present case at hand, however, the facts are different. The Defendants are disputing the amount of Rs. 15,88,413.63, which according to them the Plaintiffs contention that it is an admitted liability of the Defendants is not correct. The correspondence between the parties makes it very evident that this amount is disputed. In fact, the Defendants contention is that they are not liable to pay this amount, and that, they have made over payment to the Plaintiffs, and for this, they have a claim

of set-off against the Plaintiffs. According to them, Plaintiffs are dishonestly taking advantage of the letter dated 12-5-1998, which was purely for the auditing purposes of the Plaintiffs, and was given as requested by the Plaintiffs, and that, just because they had not written the words 'without prejudice', etc. liability should not be fastened upon them and it should not be said that the Defendants had admitted the liability, when in fact, they had not.

17. I have heard, both the Advocates at length. I have also perused the entire proceedings and the case-law cited by both the parties, and in my opinion, neither party should be allowed to withdraw the amount. The Plaintiffs should not be allowed to withdraw the amount because without there being a decree in their favour against the Defendants, they are asking for this amount directly. At the same time. Defendants should not be allowed to withdraw the amount because indeed there was no liberty granted to the Defendants by the Company Judge to make such an application for withdrawal of the amount. Prima facie, it appeared to the learned Company Judge that it would be proper if the Defendants were directed to deposit the amount as per the claim made by the Plaintiffs. To avoid the rigorous order of company being wound-up and to show their bona fides, Defendants deposited this amount.

The Plaintiffs, on the contrary, have approached this Court in pursuance to the liberty granted to them. But of course, the application has to be entertained in accordance with law and in the absence of decree in their favour, such an application for withdrawal cannot be granted.

18. Mr. Nair rightly relied upon the unreported Judgment in Classic Strips (P.) Ltd. v. Arrow Converters (P.) Ltd. [Appeal No. 109 of 1994 in Summary Suit No. 1618 of 1991] (Coram: M.L Pendse and M.L. Dudhat, JJ.). This was an order passed on 14-2-1994, allowing the appeal of the appellants (Original Defendants). In this case, in a Summary Suit filed by the respondents Arrow Converters Pvt. Ltd. against the appellants for recovering sum of Rs. 30,02,739.90 with incidental reliefs. The respondents took out Summons for Judgment and after considering the affidavit-in-reply filed by the Appellants, the learned Chamber Judge granted conditional leave on the Appellants depositing a sum of Rs. 25,00,000 with the Prothonotary and Senior Master. This order was carried in appeal before the Division Bench, and the Appeal Court reduced the amount to Rs. 15,00,000. The Appellants then carried the matter before the Supreme Court, but the appeal was dismissed. The Supreme Court only extended the time to deposit the amount, and the appellants deposited the amount accordingly as per the directions of the Supreme Court, within the stipulated period.

When the matter appeared before the Chamber Judge, to ascertain whether the amount was deposited within the stipulated period, the respondents (Original Plaintiffs) made oral request for directing the Prothonotary and Senior Master to hand over the amount of Rs. 15,00,000 to the Respondents, and the learned Chamber Judge acceded to that request. The learned Chamber Judge observed that the respondents could withdraw the amount on furnishing bank-guarantee and on undertaking that the amount would be brought back if so directed. This order passed by the Chamber Judge was carried in appeal, and the Division Bench set-aside the order passed by the Chamber Judge, observing that the learned Chamber Judge had no jurisdiction to direct the payment of the amount to the Respondent in absence of any decree. It was observed by the Division Bench that, "this novel procedure adopted at the behest of the Respondents would entitle the parties to recover the amount even before obtaining decree, and, in our judgment, such procedure should never be adopted hereafter. The order under challenge is, therefore, required to be set aside".

19. In the present case at hand also, the Plaintiffs are, by way of this Notice of Motion, praying for withdrawal of the amount deposited by the Defendants, without there being any decree in their favour. This amount is a disputed amount. The Defendants have filed their Written Statement and have raised a set-off against the Plaintiffs. According to them, they have over paid the amount to the Plaintiffs and there is no question of the Plaintiffs being entitled to this sum of Rs. 15,88,413.63. Whether the contention of the Defendants is true, whether the Plaintiffs contention that Defendants have admitted their liability by putting their confirmation on the letter dated 12-5-1998, whether this endorsement by Defendants on the Plaintiffs letter dated 12-5-1998, which was intended to be used by the Plaintiffs for the purpose of their auditing is to be used to the detriment of the Defendants.... all these questions will have to be gone into at the proper stage when the recording of evidence in the Suit would commence. Under these circumstances, when there is no decree in favour of the Plaintiffs, there is no question of allowing the Plaintiffs to withdraw the said amount, which is the only amount excluding the interest which the Plaintiffs are claiming from the Defendants. The Procedure prescribed by the Code of Civil Procedure cannot be allowed to be by passed. This Procedure, 1908 cannot be allowed to be short-circuited. The Division Bench, in its order dated 14-2-1994 deprecated this practice of allowing the Plaintiffs to withdraw the amount when there was no decree in the Plaintiffs favour. I have already observed that as far as the Defendants application for withdrawing the said amount is concerned, the same critria would apply. Everything has to be proved by recording evidence and that stage is yet to come. If the Plaintiffs claim ultimately is

found to be true then the Defendants were rightly asked to deposit the said amount, therefore, in the interest of justice, if that amount is deposited in a fixed deposit, it will yield some interest, which will be for the benefit of the party, who ultimately wins. Hence, the following order:--

Notice of Motion No. 1056 of 2001 and Notice of Motion No. 2218 of 2001 are both dismissed.